from Hacker News

Not a Bubble... At All (Instagram vs. Lucasfilm)

by levifig on 10/30/12, 8:56 PM with 41 comments

• by reso on 10/30/12, 10:45 PM

  Comparing the acquisitions of two companies in different industries fallaciously assumes there is an objective measure of the "value" of a company.

  Acquisition value != societal value.

  Instagram wasn't worth $1 billion to society, it was worth $1 billion to Facebook, which works out to $30/user. Facebook can reliably turn users into gold, therefore it was a reasonable purchase for them.

• by eridius on 10/30/12, 10:29 PM

  This is a bit of an odd comparison. I don't see LucasFilm and Instagram as being even remotely similar. For example, the reason why Instagram was so valuable is because it was poised to challenge the #1 reason why people use Facebook. If a Facebook competitor had bought Instagram then they could have potentially toppled Facebook's position atop the social networking heap. This single fact made Instagram incredibly valuable. And it's not something that can be compared to the valuation for LucasFilm.

• by ChuckMcM on 10/30/12, 11:19 PM

  Still mad? Seriously? Wow.

  Sometimes I compare laptops to milling machines, its fun since a used milling machine that can make a new crankshaft for a 77 GTO goes for less than a high end Macbook Retina. Money enables different things (making crankshafts for example) comparing the enablers is fun but not really something to get bent out of shape about.

• by wtvanhest on 10/30/12, 10:49 PM

  I'm not exactly sure what the OP's point is, but the price/employee ratios do not make any sense outside of acquihires.

  Take US Air for example, they have 30k employees and are worth 2B. That ratio is meaningles. It is even more meaningless when one programmer can eliminate 100s of jobs using automation.

  I'm sure it is a useful metric for some analysis, but it doesn't seem to be in the case of instagram which seemed much more like a play to remove a question mark from institutional investors minds prior to an IPO.

• by confluence on 10/30/12, 11:33 PM

  FACEBOOK

  Web app for taking and sharing pictures taken with your digital camera over ADSL broadband to brag/talk to your friends about.

  2 years of existence

  1 product

  24 employees

  30M+ users

  $0 revenue

  What exactly is your point? Instagram had insane adoption and was eroding Facebook's control over both pictures and mobile - the two biggest drivers of future growth over the next decade in both users and ad dollars.

  Facebook bought them with overvalued stock (before IPO) so it was ~$500 million which is the same as what the VCs valued it at a month before it was acquired.

  It was a good acquisition - basically a hedge against market obsolescence, easy injection of new IP and easy injection of mobile users.

  Excite could've bought Google for ~$1 million back in the late 90s. Yahoo! could've had Facebook for ~$1 billion if the pressure on Zuckerberg was higher.

  They choose not to buy that option. They don't exist anymore.

• by jonny_eh on 10/30/12, 10:39 PM

  One datapoint (the Instagram purchase) does not mean the industry is in another bubble.

  Instagram was actually valuable to people at least, compared to the startups getting funding in the 90s. The funding of Color on the other hand was a bit reminiscent of those days though.

• by hiddenstage on 10/30/12, 11:10 PM

  Instagram was a very real competitor to Facebook. They also have practically zero expenses. It took only 1% of Facebook's market cap (at the time) to acquire them.

  Lucasfilm is in a very crowded space. They have a ton of expenses which results in loses a good percentage of the time. Their best days were probably behind them (especially since they chose to stop making new Star Wars movies).

  Basically, this is comparing two completely different businesses in completely different markets. I think both were good deals for the acquirers.

  I'll leave with this: I think selling Band Aids is a better business than Yahoo - but you're crazy if you think Yahoo doesn't have an insane higher multiple of potential.

• by diego on 10/30/12, 11:06 PM

  Regardless of whether we are in a bubble or not, it's embarrassing to see how easily someone can get a blatantly fallacious comparison on the front page of Hacker News just because of its emotional resonance with some users.

• by lojack on 10/31/12, 12:47 AM

  Lucasfilm:

  $7 billion gross over the course of 41 years with 1,001-5,000 employees (http://www.linkedin.com/company/lucasfilm).

  Instagram:

  $0 over 2 years with 13 employees.

  That $7 billion could easily turn out to be negative profit with that number of employees. Looking at the movies Lucasfilms puts out, 90% of their profits comes from Star Wars and Indiana Jones. Its going to be very hard for them to continue sequels to these movies. Then you look at the growth of the market.

  I understand Instagram doesn't have profits... but I'm still not convinced

• by traughber on 10/30/12, 10:54 PM

  Facebook paid $1 billion for Instagram in part because of the opportunity cost Facebook faced by not getting the page views from engagement stemming from photos posted to Instagram that wouldn't have been seen on Facebook. When you consider how much engagement Facebook could have potentially missed out on, $1 billion doesn't seem so irrational, even though Instagram had to yet to monetize the service themselves.

• by gdg92989 on 10/30/12, 10:41 PM

  I dont really see what Facebook overpaying for Instagram has to do with there being a bubble or not. I'm also not sure why you think that THX and ILM should be a part of Lucasfilm's valuation considering the fact that lucasfilm has not owned either company for a decade.

• by smilliken on 10/30/12, 10:52 PM

  There will always be outliers; extrapolating macro trends from anecdotes is not very informative.

  The only reason Instagram sold for $1B was because Facebook was willing to pay that price (especially in stock).

• by stevewilhelm on 10/30/12, 10:52 PM

  One was purchased to prop up an IPO price, the other for long term revenue. In both cases, their purchase was appropriate.

  To be accurate, final purchase price for Instagram was $710 million.

• by bduerst on 10/30/12, 11:24 PM

  How many people, right now, are

  A) using Instagram?

  B) watching a Lucasarts film?

  Edit: The point is value isn't always generated from a price tag. User timeshare has it's own value for advertising companies.

• by justindocanto on 10/30/12, 10:50 PM

  Not a relevant comparison... At all

• by interg12 on 10/30/12, 10:49 PM

  I'm tired self-evident "bubble" statements. btw, Instagram recently hit 100 million users.